There have long been arguments about what rights an individual has if employed under a contract of employment which is itself illegal. As a general principle, the courts will not enforce illegal contracts – but what about discrimination claims? They derive from the (illegal) contract of employment, but are a separate statutory tort in their own right. The Supreme Court has today set out its view of the law.

The problem often arises where the illegality is that the individual does not have the right to work in the UK. That was the case in Hounga v Allen, where the claimant left Nigeria to work in the household of the Allens in the UK. This arrangement had been brokered by Mrs Allen’s father in Nigeria, who the Court of Appeal described as the “mastermind” behind the scheme. In order for the claimant to gain a visa to enter the UK, the claimant (who was a child at the time) had presented false papers to the British embassy in Nigeria. These had enabled her to obtain a visitors visa to enter the UK. She came to the UK, overstayed on her visitors visa, and lived with and worked for the Allens.

While working for the Allens, she was seriously mistreated, and eventually thrown out on to the streets. She brought a range of claims in the employment tribunal, including unfair dismissal, unlawful deductions from wages and race discrimination.

The employment tribunal found that the claimant had knowingly lied in order to come to the UK, and that she knew she did not have the right to work in the UK. It found that her employment in the UK was illegal, that the claimant knew and had participated in that illegality, and that was sufficient to mean that her unfair dismissal and unlawful deductions from wages claims could not be considered.

At the same time, the tribunal found that the dismissal had been an act of race discrimination, and permitted this claim to succeed despite the illegal nature of the contract.

In the Court of Appeal, Rimer LJ overturned the employment tribunal’s decision on this point. He contrasted Hall v. Woolston Hall Leisure Ltd (in which a sex discrimination claim had been allowed to proceed despite the fact that the claimant had been paid without tax being deducted from her wages) with Vakante v. Governing Body of Addey and Stanhope School (No 2) (where a race discrimination claim was not allowed to proceed as the claimant had misled the employer about his immigration status). In Hall, the contract itself was not fundamentally illegal – it was simply that it had been illegally performed by the employer. In Vakante the contract had been illegal from the start, and the fault was that of the employee. Rimer LJ considered Hounga to fall squarely within the principles of Vakante, so that the claimant should not be permitted to succeed in her discrimination claim. In his view it did not make any difference that in Hounga the employer was fully involved in the illegality, whereas in Vakante the employer was innocent, having been misled by the employee.

In its judgment, the Supreme Court has unanimously restored the employment tribunal’s decision and permitted the discrimination claim.

Lord Wilson (with whom Lady Hale and Lord Kerr agreed) went back to the public policy origins of the doctrine against enforcing illegal contracts, and in a powerful judgment from paragraph 42 onwards, finds that the claimant was the victim of what was, if not actual human trafficking, then very close to it. In such a case, the UK’s international obligations required it to permit the claimant to bring her claim. Lord Wilson strongly hinted (para 24) that the same analysis ought to apply to a claim for unlawful deductions from wages.

Lord Hughes (with whom Lord Carnwath agreed) found that the claim should be allowed, but on the alternative basis that there was insufficient link between the illegality and the claim – (para 67) “the former merely provided the setting or context in which the tort was committed, and to allow her to recover for that tort would not amount to the court condoning what it otherwise condemns.”